Loyola Marymount University and Loyola Law School
Digital Commons at Loyola Marymount
University and Loyola Law School
Loyola of Los Angeles Law Review
Law Reviews
10-27-2014
Fear And Loathing Of Class Action Arbitration, Or
How To Dismiss The Effective Vindication
Doctrine
Mark Bolin
J.D. Candidate, May 2014, Loyola Law School, Los Angeles
Recommended Citation
Mark Bolin, Fear And Loathing Of Class Action Arbitration, Or How To Dismiss The Effective Vindication Doctrine, 47 Loy. L.A. L. Rev.
563 (2014).
Available at: http://digitalcommons.lmu.edu/llr/vol47/iss2/9
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FEAR AND LOATHING OF CLASS ACTION
ARBITRATION, OR HOW TO DISMISS THE
EFFECTIVE VINDICATION DOCTRINE
Mark Bolin*
I. INTRODUCTION
Civil claims have long served a dual role of compensating
consumers while deterring wrongful conduct.1 Some federal claims
are so important as a deterrent that courts consider them to be an
integral part of the government’s enforcement regime.2 For example,
the Sherman Act has long provided for private enforcement of
antitrust claims in order to supplement the Department of Justice’s
(DOJ) efforts.3 However, the courts cannot fulfill either of these roles
if consumers lack incentives to bring their claims in the first place.
This issue is common with small and negative value claims,4 in
* J.D. Candidate, May 2014, Loyola Law School, Los Angeles; B.A. Political Science,
University of California, Santa Barbara, June 2008. I would like to thank my faculty advisor,
Professor Hiro Aragaki, for his invaluable advice, as well as the editors of the Loyola of Los
Angeles Law Review for their hard work throughout the editing process. I could not have written
this Comment without their help.
1. See Am. Soc’y of Mech. Eng’rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 572 n.10 (1982)
(“Congress created the treble-damages remedy . . . precisely for the purpose of encouraging
private challenges to antitrust violations. These private suits provide a significant supplement to
the limited resources available to the Department of Justice for enforcing the antitrust laws and
deterring violations.” (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 344 (1979))).
2. See, e.g., Reiter, 442 U.S. at 344.
3. 15 U.S.C. § 1 (2012); see also Reiter, 442 U.S. at 344 (“Congress created the trebledamages remedy of § 4 precisely for the purpose of encouraging private challenges to antitrust
violations. These private suits provide a significant supplement to the limited resources available
to the Department of Justice for enforcing the antitrust laws and deterring violations. Indeed,
nearly 20 times as many private antitrust actions are currently pending in the federal courts as
actions filed by the Department of Justice.”).
4. AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1760 (2011) (Breyer, J.,
dissenting). “Negative value claims” are claims in which plaintiffs must spend more to prevail
than they could potentially receive if they prevail.
563
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which the defendant seeks to profit by targeting many individuals for
small sums of money.5
In American Express Co. v. Italian Colors Restaurant, the
Supreme Court held that American Express could require customers
to arbitrate claims individually even if the cost of arbitration was far
more than what any individual plaintiff could expect to recover.6
However, in reaching that conclusion, the Court paid little attention
to the central issue of the case: whether the arbitration clause violates
the effective vindication doctrine by denying the plaintiffs any means
at all to pursue their claims. Instead, the Court focused narrowly on
whether an arbitration clause can ban class action arbitration, a
question it had already decided.7 Consequently, the Court has further
limited the ability of customers to successfully bring small and
negative value claims against creative corporate wrongdoers. Simply
put, the Court’s holding is a betrayal of its precedent, becoming the
most recent addition to a long line of cases aimed at limiting the
availability of class actions to plaintiffs.8
This Comment argues that Italian Colors allows corporations to
effectively insulate themselves from liability for wrongful conduct
that results in only small-dollar claims through creative use of class
action arbitration waivers. Part II describes the procedural history of
the case and the Court’s analysis. Part III discusses the rationale
behind the Court’s holding and explores its implications for private
enforcement. Finally, Part IV concludes with a summary of the
realities of class action arbitration waivers in light of Italian Colors.
II. STATEMENT OF THE CASE
A. Lower Court History
In 2006, Italian Colors Restaurant and a number of other New
York and California businesses (“Plaintiffs”) filed a lawsuit against
American Express for violating Sections 1 and 2 of the Sherman
5. See Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004) (“The realistic
alternative to a class action is not 17 million individual suits, but zero individual suits, as only a
lunatic or a fanatic sues for $30.”).
6. Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309 (2013).
7. Id. at 2312 (citing Concepcion, 131 S. Ct. at 1743).
8. See, e.g., Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1429 (2013); Concepcion, 131 S.
Ct. at 1753.
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Act.9 Plaintiffs alleged that American Express used its monopoly
power to impose certain terms on them in its Card Acceptance
Agreement (the “Agreement”).10 One of the provisions of the
Agreement that Plaintiffs alleged violated the Sherman Act was its
collective action waiver arbitration clause.11 The clause required all
claims related to it to be arbitrated on an individual—not classwide—basis.12
Plaintiffs argued that the clause was unenforceable because it
insulated American Express from liability by prohibiting Plaintiffs
from sharing their arbitration costs.13 Plaintiffs submitted testimony
from a professional economist with substantial experience in
individual and class action antitrust litigation that stated that proving
their claims would cost somewhere between hundreds of thousands
and a million dollars.14 Individually, however, Plaintiffs could not
expect to recover more than $5,000 each on average.15 Plaintiffs
argued that the substantial cost of proving their antitrust claims in
relation to the small sum recoverable meant that no individual
plaintiff would pursue its case against American Express.16
The district court rejected this argument and required Plaintiffs
to submit to arbitration.17 The court reasoned that the alleged high
cost of proving Plaintiffs’ claims did not insulate American Express
from liability because Plaintiffs could potentially recover much more
than the $5,000 they claimed.18 The court pointed out that Section 4
of the Clayton Act allows plaintiffs with antitrust claims to recover
9. In re Am. Express Merchs. Litig., 03 CV 9592 (GBD), 2006 WL 662341, at *1
(S.D.N.Y. Mar. 16, 2006), rev’d and remanded sub nom. In re Am. Express Merchs. Litig., 554
F.3d 300 (2d Cir. 2009), rev’d sub nom. Italian Colors, 133 S. Ct. at 2304.
10. Id.
11. Id. at *2. Plaintiffs also argued that American Express imposed a tying arrangement
upon them whereby merchants who chose to accept American Express charge cards had to also
accept American Express credit cards. Id.
12. Id.
13. Id. at *4–5.
14. Id. at *5.
15. In re Am. Express Merchs. Litig., 554 F.3d 300, 308 (2d Cir. 2009), cert. granted,
judgment vacated sub nom. Am. Express Co. v. Italian Colors Rest., 130 S. Ct. 2401 (2010).
16. In re Am. Express Merchs. Litig., 2006 WL 662341, at *5.
17. Id. at *10.
18. Id. at *5.
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treble damages and the costs of suit, which would presumably
include the cost of any expert opinion.19
On appeal to the Second Circuit, Plaintiffs renewed their
argument that the arbitration clause was unenforceable because it
effectively insulated American Express from liability.20 This time,
the court agreed.21 First, the court noted that the district court’s
reasoning that Section 4 of the Clayton Act provides for the
compensation of Plaintiffs’ litigation costs failed to account for an
important limiting principle.22 In awarding litigation costs to
plaintiffs under the Clayton Act, courts are severely limited by
federal statute.23 The applicable statute currently allows for a mere
$40 per diem award, which would not be nearly enough to cover the
expert’s fees.24 Furthermore, the district court’s reasoning did not
take any account of what would happen if Plaintiffs lost. In such a
case, Plaintiffs would recoup none of their costs.25 Relying on the
effective vindication doctrine first articulated in Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc.,26 the court held that the
arbitration clause was unenforceable because it effectively denied
Plaintiffs the opportunity to vindicate their claims.27
The Supreme Court granted certiorari and vacated the Second
Circuit’s judgment in light of Stolt-Nielsen S.A. v. AnimalFeeds
International Corp.,28 remanding for further consideration.29 On
reconsideration, the Second Circuit held that Stolt-Nielsen S.A. did
not change its analysis and again reversed the district court’s
judgment.30 However, the Second Circuit placed a hold on its
mandate in order to allow American Express to file a petition seeking
19. Id.; see also 15 U.S.C. § 15 (2012) (stating that any person injured by violation of
antitrust law shall recover threefold damages and the cost of suit, including a reasonable
attorney’s fee).
20. In re Am. Express Merchs. Litig., 554 F.3d at 311.
21. Id. at 319.
22. Id. at 317–18.
23. Id.
24. Id. at 318 (citing 28 U.S.C. § 1821(b) (2012)).
25. Id.; see also 15 U.S.C. § 15 (2012) (providing recovery for only successful litigants).
26. 473 U.S. 614 (1985).
27. In re Am. Express Merchs. Litig., 554 F.3d at 319.
28. 559 U.S. 662 (2010).
29. Am. Express Co. v. Italian Colors Rest., 130 S. Ct. 2401, 2401 (2010).
30. In re Am. Express Merchs. Litig., 634 F.3d 187, 200 (2d Cir. 2011), rev’d sub nom. Am.
Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013).
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writ of certiorari.31 While its mandate was on hold, the Supreme
Court decided AT&T Mobility LLC v. Concepcion,32 which held that
the Federal Arbitration Act (FAA) preempted a California judgemade law that class action arbitration waivers were per se
unconscionable.33 In light of Concepcion both parties filed additional
briefing with the Second Circuit.34 It subsequently reconsidered its
opinion and again affirmed its judgment, finding that Concepcion did
not affect its analysis.35
On November 9, 2012, the Supreme Court granted certiorari.36
The question the Court posed to the parties was whether a
contractual waiver of class arbitration is enforceable under the FAA
when the plaintiffs’ cost of individually arbitrating a federal statutory
claim exceeds the potential recovery.37
B. Supreme Court Decision
1. The Majority Opinion
Justice Scalia’s brief majority opinion began with a description
of the FAA’s mandate to “‘rigorously enforce’ arbitration
agreements according to their terms” absent a contrary congressional
command.38 He then concluded that there was no contrary
congressional command, either in the FAA or Federal Rule of Civil
Procedure 23—which establishes the requirements for class action
treatment—that compelled the Court to invalidate the Agreement’s
arbitration clause.39 He noted that neither Rule 23 nor the FAA
entitled Plaintiffs’ claims to class action treatment and in fact
imposed stringent requirements on class action certification.40 This
observation did not end his analysis, however, because even without
31. In re Am. Express Merchs. Litig., 667 F.3d 204, 206 (2d Cir. 2012), rev’d sub nom. Am.
Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013).
32. 131 S. Ct. 1740 (2011).
33. Id. at 1753; In re Am. Express Merchs. Litig., 667 F.3d at 206.
34. In re Am. Express Merchs. Litig., 667 F.3d at 206.
35. Id.
36. Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 594 (2012).
37. Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2307 (2013).
38. Id. at 2309 (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985)).
39. Id.
40. Id. at 2310.
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a contrary congressional command, the clause would have been
unenforceable if it had violated the effective vindication doctrine.41
Justice Scalia began his discussion of the effective vindication
doctrine that originated in Mitsubishi by noting that it was not a part
of that case’s holding and was therefore dicta.42 Mitsubishi
concerned a sales agreement between Mitsubishi Motors Corporation
(“Mitsubishi”) and a Puerto Rican corporation, Soler ChryslerPlymouth, Inc. (“Soler”).43 The sales agreement mandated that Soler
sell a certain number of Mitsubishi automobiles every month while
requiring all claims arising out of the sales agreement to be settled by
arbitration in Japan.44 After Soler’s sales of its Mitsubishi
automobiles began to decline, it told Mitsubishi it would not accept
the number of vehicles required by the sales agreement.45 Mitsubishi
subsequently moved to compel Soler to appear before arbitration
proceedings in Japan based on its claim that Soler had violated the
terms of the agreement.46
Soler also counterclaimed for violations of the Sherman Act.47
In its opposition to Mitsubishi’s motion to compel arbitration, Soler
argued that its antitrust claims were inappropriate for arbitration
abroad.48 According to Soler, private antitrust claims are too
important to entrust to arbitrators abroad who have no exposure to
American laws or values.49 The Court in Mitsubishi rejected this
argument, but noted that if Soler had established that it could not
vindicate its rights because of the arbitration clause it would be
unenforceable.50 According to Justice Scalia, the Court’s qualifying
statement was not a part of its holding, and was therefore dictum.51
Furthermore, Justice Scalia argued that since Mitsubishi, the
Court has interpreted the doctrine as giving plaintiffs only the right
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
Id.
Id.
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 616–17 (1985).
Id. at 617.
Id.
Id. at 618–19.
Id. at 619–20.
See id. at 632.
Id.
Id.
Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2310 (2013).
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to pursue their claims, not an affordable means of proving them.52
For example, in Green Tree Financial Corp.-Alabama v. Randolph,53
the Court concluded that a filing fee that was so onerous that it
effectively prevented plaintiffs from bringing their case at all would
violate the effective vindication doctrine.54 In Randolph, Larketta
Randolph brought a claim for violation of the Truth in Lending Act
(TILA) and the Equal Credit Opportunity Act (ECOA) against the
lienholder of her mobile home loan, Green Tree Financial
Corporation (“Green Tree”).55 Green Tree then moved to compel
arbitration of Randolph’s claims in accordance with the parties’ loan
installment contract.56 In response, Randolph argued that the
agreement’s arbitration clause was unenforceable because it failed to
protect her from potentially high arbitration costs.57
The Court rejected this argument, holding that an arbitration
clause is not unenforceable merely because it is silent on the issue of
arbitration costs and fees.58 In order to render an arbitration clause
unenforceable, the Court stated, a movant would have to establish
that it faced more than a mere “risk” of prohibitively costly
arbitration.59 According to Justice Scalia, a filing fee like the one in
Randolph would implicate the effective vindication doctrine because
it would prohibit Plaintiffs from even accessing the courts.60 This, he
contended, is materially different from an arbitration clause that
merely makes proving a claim unaffordable but leaves a plaintiff at
least ostensible access to the courts.61
Justice Scalia cited two cases in further support of his argument
that the FAA’s preference for arbitration means the Agreement’s
collective action arbitration waiver should be enforced. First, he
noted that in Gilmer v. Interstate/Johnson Lane Corp.,62 the Court
upheld an arbitration clause even though the relevant statute, the Age
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
Id. at 2310–11.
531 U.S. 79 (2000).
Id. at 90.
Id. at 82–83.
Id. at 83.
Id. at 89.
Id. at 91.
Id.
Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2310–11 (2013).
Id. at 2311.
500 U.S. 20 (1991).
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Discrimination in Employment Act,63 expressly allowed for
collective actions.64 The Court also upheld the arbitration agreement
at issue in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer,65 in
spite of the plaintiff’s argument that it violated the Carriage of Goods
by Sea Act by lessening the liability of carriers for damaged goods.66
According to Justice Scalia, these cases stand for the proposition that
a class action arbitration waiver does not deny any party the
opportunity to effectively vindicate their claims merely by virtue of
the fact that it limits arbitration to the two contracting parties.67
Finally, Justice Scalia argued that the Court’s recent decision in
AT&T Mobility LLC v. Concepcion all but decides the case in
American Express’s favor.68 Concepcion held that the FAA
preempted a California judicial doctrine that considered class action
arbitration waivers per se unconscionable.69 The Court concluded
that the purpose of the FAA was to encourage the speedy resolution
of claims through an informal arbitration process and that any
requirement that arbitration be able to proceed on a class-wide basis
was contrary to that intent.70
In his Italian Colors concurrence, Justice Thomas affirmed the
position he took in Concepcion that the FAA only allows arbitration
clauses to be invalidated when there was some defect in their
formation, such as fraud or duress.71 Justice Thomas contended that
Plaintiffs argued the arbitration clause was invalid on two grounds:
(1) it “would contravene the policies of the antitrust laws,” and (2) it
would prevent the effective vindication of their statutory rights.72 He
concluded that the Court must, therefore, enforce the arbitration
clause because Plaintiffs did not even allege a defect in the formation
of the clause.73
63.
64.
65.
66.
at 530).
67.
68.
69.
70.
71.
72.
73.
29 U.S.C. § 621 (2006).
Am. Express Co., 133 S. Ct. at 2311.
515 U.S. 528 (1995).
Am. Express Co., 133 S. Ct. at 2311 (citing Vimar Seguros y Reaseguros, S.A., 515 U.S.
Id.
Id. at 2312.
Id.
Id.
Id. (Thomas, J., concurring).
Id. at 2312–13.
Id. at 2313.
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2. The Dissent
Justices Ginsburg and Breyer joined Justice Kagan’s dissent.74
The dissent rested on the argument that the Agreement’s arbitration
clause is invalid because it prevented the effective vindication of
Plaintiffs’ claims.75 According to the dissent, the practical effect of
the Court’s ruling is to require Italian Colors Restaurant to bear all of
the costs of arbitration by itself despite the fact that its individual
claims cost far more to prove than it could possibly collect in
damages.76 This can only mean that American Express altogether
eludes liability for antitrust violations relating to the Agreement
because not only would no reasonable plaintiff pursue such a claim,
but no reasonable attorney would take it.77
Justice Kagan’s dissent first took aim at the majority’s statement
that the effective vindication doctrine “originated as dictum.”78 The
dissent stated that the effective vindication doctrine as applied in
Mitsubishi was a central part of its holding and has subsequently
been referenced in cases such as Randolph and Gilmer.79 Therefore,
while it may have originated as dictum in Mitsubishi, it has since
become a principle the Court has consulted when a party alleges that
another party has insulated itself from liability.80
The dissent next addressed the majority’s contention that the
effective vindication doctrine did not apply to the Agreement’s
arbitration clause because it did not prevent Plaintiffs from accessing
the courts altogether, but merely made it “not worth the expense.”81
The dissent argued that this distinction is a betrayal of the principles
of the effective vindication doctrine articulated in Mitsubishi and
Randolph.82 While the dissent acknowledged that the arbitration
clause was different from those the Court discussed in Mitsubishi and
Randolph, it was the same in one important respect: it effectively
74. Id. (Kagan, J., dissenting). Justice Sotomayor took no part in the consideration of the
case. Id. at 2312 (majority opinion).
75. Id. at 2313 (Kagan, J., dissenting).
76. Id. at 2316.
77. Id.
78. Id. at 2317.
79. Id.
80. Id.
81. Id. at 2318.
82. Id. at 2317.
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prohibited Plaintiffs from vindicating their claims.83 Furthermore, the
dissent argued that the majority’s holding directly contradicted its
opinion in Randolph, which stated that agreements that make
arbitration prohibitively expensive violate the effective vindication
doctrine.84
The dissent also argued that the majority incorrectly focused on
the fact that the arbitration agreement prohibited class actions.85 The
relevant question was not whether the Agreement’s arbitration clause
was unenforceable because it prohibits Plaintiffs from proceeding as
a class, but whether it was unenforceable because it deprived
Plaintiffs of any effective means to vindicate their claims.86 The
dissent contended that the Agreement as a whole prevented any and
all alternatives to class action arbitration that might otherwise be
available to Plaintiffs.87 For example, the arbitration clause’s
collective action waiver prevented the joinder or consolidation of
claims.88 The Agreement’s confidentiality clause also prevented
informal coordination among claimants who might otherwise
collaborate on expert testimony.89 As such, the Agreement prohibited
any form of cost sharing and effectively robbed Plaintiffs of any
opportunity to vindicate their claims.
Finally, Justice Kagan’s dissent challenged the majority’s
contention that Concepcion “all but resolves this case.”90 Concepcion
did not in any way address the effective vindication doctrine.91
Instead, it addressed whether the FAA preempts a judge-made rule
about the per se unconscionability of class action waivers.92 This rule
applied regardless of whether a plaintiff had some other means of
effectively vindicating its rights. Furthermore, Concepcion involved
a state law, to which the effective vindication doctrine simply does
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
Id. at 2317–18.
Id. at 2318.
Id. at 2318–19.
Id. at 2318.
Id. at 2316.
Id.
Id.
Id. at 2319.
Id. at 2319–20.
Id. at 2320.
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not apply.93 To claim that Concepcion resolves this case is to
fundamentally misunderstand its dispositive issue.
III. ANALYSIS
The Court’s holding effectively allows businesses to insulate
themselves from liability for federal statutory violations through the
use of burdensome arbitration agreements. By improperly focusing
on the class action aspect of the Agreement’s collective action
arbitration waiver, the Court reached a holding that renders the
effective vindication doctrine hollow and weakens the country’s
private enforcement regime. First, the effective vindication doctrine
itself is a central part of Mitsubishi and is not dicta in that case.94
Second, the Court’s holding contradicts both its own jurisprudence
and the purpose of the effective vindication doctrine.95 This has
implications not just for plaintiffs’ ability to prove their claims and
be compensated but for federal enforcement regimes.96 This leaves
potential plaintiffs with only three options. The first two are
suggested in Italian Colors itself.97 Ultimately, however, businesses
will be able to immunize themselves from liability by creatively
utilizing arbitration clauses until Congress amends the FAA.98
A. Is the Effective Vindication Doctrine Dicta?
Justice Scalia began his analysis of the effective vindication
doctrine by implicitly minimizing its importance, claiming that the
doctrine originated as dictum.99 Justice Kagan flatly denied this,
noting that even if the doctrine was dictum in Mitsubishi, it has since
become a principle that the Court has relied upon in its holdings.100
Although the line between dictum and holding is not always clear,
the principle that a contract clause preventing the effective
vindication of a party’s right is unenforceable is not dictum in
93.
94.
95.
96.
97.
98.
99.
100.
Id.
See infra Part III.A.
See infra Part III.B.
See infra Part III.C.
See infra Part III.D.
See infra Part III.D.
Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2310 (2013).
Id. at 2317 (Kagan, J., dissenting).
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Mitsubishi.101 On the contrary, it is, in the words of Justice Kagan, an
“essential condition of the decision’s holding.”102
In Mitsubishi the Court rejected Soler’s argument that arbitration
clauses that require antitrust disputes to be arbitrated abroad are per
se unenforceable.103 The Court found Soler’s argument that foreign
arbitrators are incapable of fairly adjudicating American antitrust
claims unpersuasive.104 In its holding, however, the Court stated that
if Soler had actually established that its claims could not be
effectively vindicated abroad, then the arbitration clause would be
unenforceable.105 In other words, if the Court had concluded that
Soler had established that the arbitration clause prevented the
effective vindication of its claims, it would have held in favor of
Soler instead of Mitsubishi. Therefore, the effective vindication
doctrine is an “essential condition of the decision’s holding”106 and is
not dictum.
B. The Importance of the Right to Pursue a Negative Value Claim
The majority’s assertion that the effective vindication doctrine
only protects plaintiffs’ rights to pursue their claims, without
assuring an affordable means of proving them, effectively renders the
doctrine hollow and ignores the Court’s precedent. Justice Scalia’s
reasoning is directly contradicted by Randolph, which holds that
arbitration clauses that make it prohibitively expensive to bring a
claim will not be enforced.107 Moreover, a judicial doctrine that
prohibits contracting parties from denying each other access to the
courts, and makes proving their claims prohibitively expensive, is
effectively meaningless.108 The Court’s holding, therefore, both
betrays its own precedent and the purpose behind the effective
vindication doctrine.
101. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 (1985).
102. Am. Express Co., 133 S. Ct. at 2317.
103. Mitsubishi Motors Corp., 473 U.S. at 635.
104. Id. at 632–35.
105. Id. at 637.
106. Am. Express Co., 133 S. Ct. at 2317.
107. Green Tree Fin. Corp.–Ala. v. Randolph, 531 U.S. 79, 90–92 (2000).
108. See Am. Express Co., 133 S. Ct. at 2314 (Kagan, J., dissenting) (noting that a monopolist
could find many ways around an effective vindication doctrine that is “limited to [only] baldly
exculpatory provisions”).
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The Court’s reasoning directly contradicts its holding in
Randolph. This holding is important for two reasons. First, it
establishes that if Randolph had carried her burden of establishing
that prohibitively high arbitration costs prevented the effective
vindication of her claims, she would have prevailed.109 Second, it
showed no signs of differentiating between costs that are imposed to
gain access to the court, and costs that are imposed during
litigation.110 Although the costs the defendant imposed upon
Randolph were filing fees, the Court’s analysis focused on the
likelihood that Randolph would “be required to bear prohibitive
arbitration costs” in general.111 The costs of arbitration certainly
include a plaintiff’s costs in proving a claim, not merely filing fees
associated with accessing the courts. As Justice Kagan pointed out,
there is no rational basis for limiting the effective vindication
doctrine to costs incurred by plaintiffs in pursuing a claim based on
Randolph.112
Even if the majority’s holding did not directly contradict
Randolph, it did not comport with the purpose of the effective
vindication doctrine. The effective vindication doctrine is meant to
ensure that arbitration proceedings are “adequate to protect the rights
[of the parties] in question so that arbitration, like the judicial
resolution of disputes, will ‘further broader social purposes.’”113
Without this doctrine, employers and businesses could evade basic
federal protections, including anti-discrimination statutes.114 The
Court’s holding effectively allows creative businesses to completely
evade these federal protections and therefore contradicts the
doctrine’s purpose.
C. Why Lack of Private Enforcement Is a Problem
The Court’s holding also imposes further burdens on the
country’s private enforcement regime and contravenes congressional
109. Randolph, 531 U.S. at 91–92.
110. Id.
111. Id. at 90–92.
112. Am. Express Co., 133 S. Ct. at 2316 (arguing that the expert report “counts as a
‘prohibitive’ cost, in Randolph’s terminology, if anything does”).
113. Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 658 (6th Cir. 2003) (quoting Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991)).
114. See, e.g., id.
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intent. Numerous federal statutes include a private right of action
designed to supplement agency enforcement.115 This is likely
because agency officials simply do not have the resources to regulate
all corporate conduct.116 The Supreme Court has described at length
the importance of such private causes of action in ensuring the
vindication of plaintiffs’ rights.117 Moreover, the existence of a
private cause of action serves as a strong deterrent to anticompetitive
conduct.118 The Court’s holding effectively ignores Congress’s intent
to supplement agency enforcement with private lawsuits in favor of
the FAA’s preference for arbitration agreements.
D. The Options Left to Private Parties
After Italian Colors, only three ways remain for plaintiffs to
pursue their claims in the face of prohibitively burdensome
arbitration clauses. The first is to establish that the arbitration clause
denies the plaintiffs access to the courts entirely.119 The second is to
prove that there was some error in the formation of the arbitration
agreement, such as fraud or duress.120 And the third is for Congress
to amend the FAA with language explicitly proscribing arbitration
agreements that make it prohibitively expensive to prove a claim.
None of these options offer a viable alternative to class-based
procedures, and as a result, many worthwhile small claims will likely
go unvindicated.
Plaintiffs may be able to avoid class action waivers that make it
prohibitively expensive to bring their claims if they can establish that
the waivers prevent them from pursuing their claims altogether.
115. See, e.g., Sherman Act, 15 U.S.C. § 1, 2 (2012).
116. See Reiter v. Sonotone Corp., 442 U.S. 330, 344 (1979); Derek Black, Picking Up the
Pieces After Alexander v. Sandoval: Resurrecting A Private Cause of Action for Disparate
Impact, 81 N.C. L. REV. 356, 357 n.7 (2002).
117. See, e.g., Am. Express Co., 133 S. Ct. at 2313 (Kagan, J., dissenting) (“Congress created
the Sherman Act’s private cause of action not solely to compensate individuals, but to promote
‘the public interest in vigilant enforcement of the antitrust laws.’” (quoting Lawlor v. Nat’l
Screen Serv. Corp., 349 U.S. 322, 329 (1955))).
118. Perma Life Mufflers, Inc. v. Int’l Parts Corp., 392 U.S. 134, 139 (1968) (“[T]he purposes
of the antitrust laws are best served by insuring that the private action will be an ever-present
threat to deter anyone contemplating business behavior in violation of the antitrust laws.”),
overruled on other grounds by Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752
(1984).
119. Am. Express Co., 133 S. Ct. at 2310–11.
120. Id. at 2313 (Thomas, J., concurring).
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Justice Scalia’s majority opinion implied that under such
circumstances, Mitsubishi and Randolph would be controlling, and
the effective vindication doctrine would apply.121 For example, he
noted that an arbitration agreement that imposes prohibitively
expensive filing fees would presumably be unenforceable.122 Other
costs imposed upon plaintiffs before litigation, including the cost of
hiring an attorney, may also be included in this category. However, it
is unlikely that plaintiffs will face such fees in the future, as
corporate defendants can avoid this problem by simply imposing
costs at a later stage. After all, according to Italian Colors, an
arbitration agreement that does not prevent the pursuit of claims, but
merely imposes prohibitive costs, will be deemed enforceable.123
Plaintiffs could also render an arbitration agreement
unenforceable if they can establish a defect in the formation of the
agreement, such as fraud or duress. Justice Thomas’s concurrence
argued, in accordance with his opinion in Concepcion, that this is the
only ground upon which the FAA allows arbitration agreements to be
revoked.124 However, the burden of establishing fraud or duress in
the formation of a contract is a heavy one.125 Most plaintiffs will not
be able to meet this burden, in part because many jurisdictions
presume that, by signing an agreement, a party has manifested that
she has read and understood its provisions.126 The difficulty of
establishing this ground for revocation means that it is only an option
in the most egregious of cases.127
Finally, Congress could expand consumers’ access to collective
action procedures and address Italian Colors’s holding if it amends
121. Id. at 2310–11 (majority opinion).
122. Id.
123. Id. at 2317 (Kagan, J., dissenting).
124. Id. at 2312 (Thomas, J., concurring).
125. See, e.g., Lauren E. Miller, Breaking the Language Barrier: The Failure of the Objective
Theory to Promote Fairness in Language-Barrier Contracting, 43 IND. L. REV. 175, 190 (2009)
(“Fraud is a difficult defense to prove because it generally requires a party to show ‘evidence of
active or affirmative misrepresentation’ on the part of the other party at the time of contracting.”).
126. See, e.g., Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th Cir.
1992) (“[A] blind or illiterate party (or simply one unfamiliar with the contract language) who
signs the contract without learning of its contents would be bound.”); Shirazi v. Greyhound Corp.,
401 P.2d 559, 562 (Mont. 1965) (holding that an Iranian citizen with limited English had a duty
“to acquaint himself with the contents of the” contract).
127. See Miller, supra note 125, at 190; see generally Miller, supra note 125 (listing
egregious cases in which courts still held that the arbitration agreement was enforceable).
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the FAA. For example, the FAA currently states that arbitration
agreements are enforceable “save upon such grounds as exist at law
or in equity for the revocation of any contract.”128 Congress could
amend this section to allow for the invalidation of arbitration
agreements on grounds that “exist at law or in equity for the
revocation of any contract. Under no circumstances will a collective
action arbitration waiver that makes a claim prohibitively expensive
to prove be enforced. This section is meant to overturn the Supreme
Court’s holding in American Express Co. v. Italian Colors
Restaurant.” In order to convince Congress to take this step,
stakeholders such as consumer advocate groups and bar associations
will have to work together to convince their state Congress members.
Such an amendment would effectively narrow the scope of what the
Court considers to be the FAA’s “liberal policy in favor of
arbitration” and allow plaintiffs to more effectively vindicate their
rights.129
IV. CONCLUSION
In the Court’s rush to limit the availability of class action
procedures, it has immunized those businesses with the creativity to
craft obstructionist arbitration clauses. Justice Kagan perfectly
encapsulated the Court’s holding when she stated: “The Court today
mistakes what this case is about. To a hammer, everything looks like
a nail. And to a Court bent on diminishing the usefulness of Rule 23,
everything looks like a class action, ready to be dismantled.”130 The
Court has not only ignored its own precedent but also congressional
intent, and has added a powerful weapon to the arsenal of corporate
malfeasance.
128. 9 U.S.C. § 2 (2012).
129. Campaniello Imps., Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655, 665 (2d Cir. 1997).
130. Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2320 (2013).